Exhibit
10.1


 


THIRD AMENDMENT TO


CREDIT AGREEMENT


 


THIRD AMENDMENT TO
CREDIT AGREEMENT, dated as of June 30, 2004 (this “Amendment”), to the
Credit Agreement referred to below by and among APPLIED EXTRUSION TECHNOLOGIES,
INC., a Delaware corporation (the “Borrower”); the other Credit Parties
signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation
(in its individual capacity, “GE Capital”), for itself, as Lender, and
as Agent for Lenders; and the other Lenders signatory hereto.


 


W  I
T  N  E  S  S  E  T  H


 


WHEREAS, the
Borrower, the other Credit Parties, the Agent, and the Lenders are parties to
that certain Credit Agreement, dated as of October 3, 2003 (as amended,
supplemented or otherwise modified from time to time, prior to the date hereof,
the “Credit Agreement”);


 


WHEREAS, Borrower
has requested that Agent and the Lenders agree to amend the financial covenants
in the Credit Agreement; and


 


WHEREAS, the
Borrower, the Agent and the Lenders have agreed to such request and agree to
amend certain provisions of the Credit Agreement in the manner, and on the
terms and conditions, provided for herein.


 


NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:


 


1.             Certain Definitions.  Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Credit
Agreement.


 


2.             Amendments to Credit Agreement.  As of the Amendment Effective Date (as
defined below), Section 6.14 of the Credit Agreement shall be amended by
deleting clause (f) thereto in its entirety and inserting the following
clause (f) in lieu thereof: “(f) scheduled payments of interest on the Senior
Notes, provided, that with respect to this clause (f), (i) no
Default or Event of Default has occurred and is continuing or would result
after giving effect to any such Restricted Payment and (ii) Borrower shall have
Borrowing Availability of at least $20,000,000 after giving effect to any such
Restricted Payment.”


 


3.             Amendment to Annex A to the
Credit Agreement .  As of the
Amendment Effective Date (as defined below), Annex A to the Credit Agreement
shall be amended by deleting the definition of “Default” therein and
inserting the following definition in lieu thereof:


 

















 


“Default” means
any event that, with the passage of time or notice or both, would, unless cured
or waived, become an Event of Default; provided, however, that
for purposes of (i)  Section 2.2 (c) and
(ii) clause (c) of Annex C to the Credit Agreement, the failure of the Borrower
to make payment of interest on the Senior Notes due on July 1, 2004 shall not
constitute a “Default” for the period beginning from the Amendment Effective
Date (as defined in the Third Amendment to this Agreement) through the date of
expiration of the applicable grace period provided for under the Senior Note
Indenture), so long as such payment is made on or prior to the expiration of
the applicable grace period provided for under the Senior Note Indenture and,
with respect to clause (ii) above, prior to the payment of such interest,
Borrower and AET Canada transfers or cause to be transferred prior to the end
of each business day from the AET Canada Account and/or the Disbursement
Accounts of AET Canada the aggregate balance in (or held for the benefit of)
AET Canada in the AET Canada Account and such Disbursement Accounts in excess
of CDN$1,500,000 to a Blocked Account of Borrower (or, if established, the
Concentration Account).


 


4.             Amendment to Annex G to the
Credit Agreement .  As of the
Amendment Effective Date (as defined below), Annex G to the Credit Agreement
shall be amended by deleting subsections (b) and (c) in their entirety and
replacing them with the following:


 


“(b)         Minimum Fixed Charge Coverage Ratio.  Borrower and its Subsidiaries shall have on
a consolidated basis at the end of each Fiscal Quarter set forth below, a Fixed
Charge Coverage Ratio for the 12-month period then ended of not less than the
following:


 


	
  Fiscal Quarter ending

  	
   

  	
  Minimum
  Fixed Charge Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2003

  	
   

  	
  0.65

  	
   

  
	
  December 31,
  2003

  	
   

  	
  0.55

  	
   

  
	
  March 31, 2004

  	
   

  	
  0.60

  	
   

  
	
  June 30, 2004

  	
   

  	
  0.55

  	
   

  
	
  September 30,
  2004

  	
   

  	
  0.85

  	
   

  
	
  December 31,
  2004

  	
   

  	
  1.00

  	
   

  
	
  March 31, 2005

  	
   

  	
  1.05

  	
   

  
	
  June 30, 2005

  	
   

  	
  1.10

  	
   

  
	
  September 30,
  2005 and each Fiscal Quarter ending thereafter

  	
   

  	
  1.20

  	
   

  



 


(c)           Minimum EBITDA.  Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, EBITDA for the 12-month period then ended of not less than the
following:


 


	
  Fiscal Quarter ending

  	
   

  	
  Minimum
  EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2003

  	
   

  	
  $

  	
  37,125,000

  	
   

  
	
  December 31,
  2003

  	
   

  	
  35,628,000

  	
   

  
	
  March 31, 2004

  	
   

  	
  35,445,000

  	
   

  
	
  June 30, 2004

  	
   

  	
  30,000,000

  	
   

  
	
  September 30,
  2004

  	
   

  	
  43,072,000

  	
   

  
	
  December 31,
  2004

  	
   

  	
  48,293,000

  	
   

  
	
  March 31, 2005

  	
   

  	
  52,445,000

  	
   

  
	
  June 30, 2005

  	
   

  	
  58,139,000

  	
   

  
	
  September 30,
  2005 and each Fiscal Quarter ending thereafter

  	
   

  	
  62,000,000

  	
  ”

  
					



 


2

















 


5.             Conditions to Funding.  With respect to the provisions of Section
2.2 of the Credit Agreement, Agent and Requisite Revolving Lenders agree that
(i) the failure of any representation or warranty to be true in any Loan
Document, solely as a result of the Borrower’s failure to make payment of
interest on the Senior Notes due on July 1, 2004 shall not limit any Lender’s
obligations to fund any Advance, convert or continue any Loan as a LIBOR Loan
or incur any Letter of Credit Obligation and (ii) Borrower’s failure to make
payment of interest on the Senior Notes due on July 1, 2004 shall not alone,
without the presence of any other facts, events or circumstances (whether
arising as a result of such failure or otherwise), be deemed to create a
Material Adverse Effect for the period beginning from the Amendment Effective
Date through the date of expiration of the applicable grace period provided for
under the Senior Note Indenture), in each case, so long as such payment is made
on or prior to the expiration of the applicable grace period provided for under
the Senior Note Indenture.


 


6.             Ratification of Credit
Agreement; Remedies.


 


(a)           Except as expressly provided for, and
on the terms and conditions set forth, herein, the Credit Agreement and the
other Loan Documents shall continue to be in full force and effect in
accordance with their respective terms and shall be unmodified.  In addition, this Amendment shall not be
deemed a waiver of any term or condition of any Loan Document by the Agent or
the Lenders with respect to any right or remedy which the Agent or the Lenders
may now or in the future have under the Loan Documents, at law or in equity or
otherwise or be deemed to prejudice any rights or remedies which the Agent or
the Lenders may now have or may have in the future under or in connection with
any Loan Document or under or in connection with any Default or Event of
Default which may now exist or which may occur after the date hereof.  The Credit Agreement and all other Loan
Documents are hereby in all respects ratified and confirmed.


 


(b)           This Amendment shall constitute a
Loan Document.  The breach by any Credit
Party of any representation, warranty, covenant or agreement in this Amendment
shall constitute an immediate Event of Default hereunder and under the other
Loan Documents.


 


7.             Representations and Warranties.  The Borrower and the Credit Parties hereby
represent and warrant to the Agent and Lenders that:


 


(a)           The execution, delivery and
performance of this Amendment and the performance of the Credit Agreement as
amended by this Amendment (the “Amended Credit Agreement”) by the
Borrower and the other Credit Parties: 
(i) are within their respective organizational powers; (ii) have been
duly authorized by all necessary corporate and shareholder action; (iii) are
not in contravention of any provision of their respective certificates or
articles of incorporation or by-laws or other organizational documents; (iv) do
not violate any law or regulation, or any order or decree of any court or
Governmental Authority; (v) do not conflict


 


3

















 


with or result in the
breach or termination of, constitute a default under or accelerate or permit
the acceleration of any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which the Borrower or any
Credit Party is a party or by which the Borrower or any Credit Party or any of
its property is bound; (vi) do not result in the creation or imposition of any
Lien upon any of the property of the Borrower or any Credit Party other than
those in favor of Agent pursuant to the Loan Documents; and (vii) do not
require the consent or approval of any Governmental Authority or any other
Person.


 


(b)           This Amendment has been duly executed
and delivered by or on behalf of the Borrower and the other Credit Parties.


 


(c)           Each of this Amendment and the
Amended Credit Agreement constitutes a legal, valid and binding obligation of
the Borrower and the other Credit Parties enforceable against each of them in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditor’s rights generally and general equitable principles (whether
enforcement is sought by proceedings in equity or at law).


 


(d)           No Default or Event of Default has
occurred and is continuing both before and after giving effect to this
Amendment.


 


(e)           No action, claim or proceeding is now
pending or, to the knowledge of the Borrower and the other Credit Parties,
threatened against the Borrower or the other Credit Parties, at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators, (i) which challenges
the Borrower’s or the other Credit Parties’ right, power, or competence to
enter into this Amendment or, to the extent applicable, perform any of its
obligations under this Amendment, the Amended Credit Agreement or any other
Loan Document, or the validity or enforceability of this Amendment, the Amended
Credit Agreement or any other Loan Document or any action taken under this
Amendment, the Amended Credit Agreement or any other Loan Document or (ii)
which, if determined adversely, is reasonably likely to have or result in a
Material Adverse Effect.  To the
knowledge of the Borrower and each Credit Party, there does not exist a state
of facts which is reasonably likely to give rise to such proceedings.


 


(f)            The representations and warranties
of the Borrower and the other Credit Parties contained in the Amended Credit
Agreement and each other Loan Document shall be true and correct on and as of
the date hereof and the Amendment Effective Date with the same effect as if
such representations and warranties had been made on and as of such date,
except that any such representation or warranty which is expressly made only as
of a specified date need be true only as of such date.


 


8.             Outstanding Indebtedness. 
The Borrower and the other Credit Parties hereby acknowledge and agree
that as of June 29, 2004, (i) the aggregate outstanding amount of


 


4

















 


the Revolving Credit
Advances is $39,585,285.37,
(ii) the aggregate outstanding amount of Letter of Credit Obligations is $125,000.00, and (iii) the aggregate
outstanding principal amount of the Term Loan is $46,875,000, and that such
principal amounts are payable pursuant to the Credit Agreement without defense,
offset, withholding, counterclaim or deduction of any kind.


 


9.             Fees and Expenses


 


(a)           Amendment Fees.  To induce Agent and the Lenders to enter
into this Amendment, Borrower hereby agrees to pay Agent, for the ratable
benefit of the Lenders, an amendment fee in the amount of $267,187.50 in
immediately available funds, payable on the Effective Date (the “Amendment
Fee”).


 


(b)           Expenses.  The Borrower hereby reconfirms its
obligations pursuant to Section 11.3(b) of the Credit Agreement to reimburse
Agent for all out-of-pocket fees, costs and expenses, including the reasonable
fees, costs and expenses of counsel, consultants, auditors or other advisors,
incurred in connection incurred with the negotiation, preparation, execution
and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.


 


10.           GOVERNING LAW.  THIS AMENDMENT, IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.


 


11.           Effectiveness.  This Amendment shall become effective as of
the date hereof (the “Amendment Effective Date”) only upon satisfaction
in full in the judgment of the Agent of each of the following conditions on or
before June 30, 2004:


 


(a)           Amendment.  Agent shall have received facsimile copies
of this Amendment duly executed and delivered by the Agent, the Requisite
Lenders, the Requisite Revolving Lenders, the Borrower and each Credit Party.


 


(b)           Representations and Warranties.  All representations and warranties of or on
behalf of the Borrower and each Credit Party in this Amendment and all the
other Loan Documents shall be true and correct in all respects with the same
effect as though such representations and warranties had been made on and as of
the date hereof and on and as of the date that the other conditions precedent
in this Section 11 have been satisfied, except to the extent that
any such representation or warranty expressly relates to an earlier date.


 


(c)           Payment of Expenses.  Borrower shall have paid to Agent all costs,
fees and expenses owing in connection with this Amendment, including, without
limitation, the Amendment Fee and the other Loan Documents and due to Agent
(including, without limitation,


 


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reasonable legal fees and
expenses).


 


12.           Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.


 


[SIGNATURE PAGES FOLLOW]


 


6

















 


IN WITNESS WHEREOF,
each of the parties hereto has executed this Amendment as of date and year
first written above.


 


	
   

  	
  BORROWER

  
	
   

  	
   

  
	
   

  	
  APPLIED EXTRUSION TECHNOLOGIES,

  INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Brian P. Crescenzo

  
	
   

  	
  Name:

  	
  Brian
  P. Crescenzo

  
	
   

  	
  Title:

  	
  Vice
  President, Secretary and Chief

  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION,

  as Agent and Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James H.
  Kaufman

  
	
   

  	
   

  	
  Duly
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Christopher Cox

  
	
   

  	
   

  	
  Duly
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDERS

  
	
   

  	
   

  
	
   

  	
  BLACK DIAMOND INTERNATIONAL

  FUNDING, LTD.

  
	
   

  	
  By: 

  	
  /s/
  Alan Corkish

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TRS 1, LLC

  
	
   

  	
  By:

  	
  /s/ Deborah O’Keeffe

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MERRILL LYNCH CAPITAL, a division of

  Merrill Lynch Business Financial Services Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey L. Wilkison

  
	
   

  	
  Title:

  	
   

  	
  Director, Senior Credit Officer

  
						



 

















 


The following Persons
are signatories to this Agreement in their capacity as Credit Parties and not
as Borrower.


 


	
   

  	
  APPLIED
  EXTRUSION TECHNOLOGIES

  (CANADA) INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian P. Crescenzo

  
	
   

  	
  Name:

  	
  Brian P. Crescenzo

  
	
   

  	
  Title:

  	
  Vice President Finance,

  Secretary and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  APPLIED
  EXTRUSION TECHNOLOGIES

  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Brian P. Crescenzo

  
	
   

  	
  Name:

  	
  Brian
  P. Crescenzo

  
	
   

  	
  Title:

  	
  Vice
  President Finance,

  Secretary and Treasurer